Most of us want the people we love to be financially secure, especially our parents. But sometimes it’s complicated trying to figure out how you can help your parents as they get older.
That’s because many aging Americans have little to no retirement savings. A report from the U.S. Government Accountability Office found that nearly three in 10 adults ages 55 and over had no retirement savings in 2013.
But as your parents approach retirement – for which they may be ill-prepared – you have your own financial responsibilities and demands to consider.
“The sandwich generation is feeling torn between obligations to their aging parents and responsibility to their children,” says Annalee Leonard, owner of Mainstay Financial Group in Pensacola, Fla.
So how can you help parents without compromising your own money goals? Here are 10 steps you can take to help build a secure future for the whole family.
10 step program for helping your parents financially
1. Get honest about their situation
My mom turns 60 this month, putting both of my parents near retirement age. But we’ve never actually had a conversation about what their financial situation looks like. So though I worry about them, I don’t know if I should.
How can you help your parents if you don’t know if they even need it? Helping your parents financially starts with an honest conversation. Leonard recommends sitting parents down now before there’s a need.
“It should be done calmly over a breakfast or lunch – no alcohol involved,” she says. “[Ask] ‘do you have a long-term care plan? If so, we need to know what it is since we would be the ones who will help you to implement this if the need arises’.”
And if your parents don’t have a retirement plan, you should know about that, too.
2. Work with your parents to make a plan now
Few retirement or long-term care plans are perfect. You may find out during a discussion with your parents that they need help in one way or another.
“Address the issue before it’s an emergency,” suggests Michael Minter, managing partner of Mintco Financial.
Take the time to identify potential problems and start working on solutions. It might also take a few meetings to go over all of their finances and address various issues.
Minter says it’s important for you to remind your parents to keep an open mind. “[Your parents have to] be willing to re-evaluate their current budgets and be open to advice if they want the situation to change.” After all, there’s only so much you can do on your own to help them.
3. Get siblings on board
If you have siblings or other family members who can offer support, loop them into the conversation. That way you can pool resources and implement solutions together.
Teamwork will stave off the resentment of one child feeling like they are unfairly bearing the burden alone of helping parents financially. It will also help to spread out the responsibility, so what you give can go further.
“Everyone should chip in with money or time, whatever is needed,” says Leonard.
4. Prioritize your own financial health
Whatever help you plan to give parents, make sure it’s affordable for you to give.
“Do not be a martyr,” Leonard warns. “You’re not going to help anyone if you derail your own retirement for your parents or kids.”
Rather than offering financial aid from the get-go, you can help your parents learn how to use their own resources more wisely.
“Your parents need to use their own assets to finance their care,” explains Leonard. Then you can consider chipping in with an amount that’s reasonable and won’t derail your financial goals.
5. Gift them a session with a financial planner
Consider hiring a financial planner to help you and your parents create a strategy that puts their assets to the best use. You can even offer to set it up or pay for it.
“Advisors can help bridge the gap between parents and adult children and also help ask any awkward money questions,” Minter says.
Look for a financial planner who has experience with in-retirement planning and elder care. You may also want to consider hiring other experts, Leonard says, including an elder law attorney and a tax professional.
6. Research government benefits and assistance programs
When caring for aging parents, government programs can provide key financial help.
“Use the programs that you have in your local community that are there for very little or no cost,” Leonard says. “Find out what is in your community to serve you.”
Start by checking out this guide to federal aid for caregivers from the AARP to see what’s out there. Then help your parents navigate the process of signing up for and receiving these benefits. A few options to consider include:
- Low-income senior housing
- Supplemental Nutrition Assistance Program (SNAP)
- Social Security income and Social Security Disability income
Many cities, states, or communities also have local programs to assist senior residents and their families.
7. Consider long-term care insurance
In addition to addressing immediate needs, try to figure out how to pay for future needs.
For instance, do your parents have sufficient savings to cover the cost of elder care should they need help with daily life as they age? If the answer is no, then you should probably consider long-term care insurance.
This works like most insurance options: you or your parents pay a premium. Then if your parent should need care such as a health aide or living in a nursing home, the insurance will cover the costs.
8. Put a bill in your name
You might be reluctant to just hand cash over to parents for a number of reasons. Therefore, Minter suggests picking up some of their bills and putting them in your name instead.
“In some cases, you can pay for your parents’ medical bills in a way that won’t be considered a gift for tax purposes,” Minter adds.
9. Pay down a parent’s debts
In addition to taking over a bill, consider making payments toward your parents’ debts.
Remember, the more debts your parents have, the more debt payments they’ll have to keep up with in retirement. This will eat up their cash flow and make it harder to live on a limited income.
By paying off or taking over a parent’s debt, however, you free up their cash flow. If you’d like more control over the account, you could also refinance their debts with a personal loan in your name.
However, it’s important to get your parents to commit to avoiding future debts. Paying their debts now won’t help them if they just run up new debts later.
10. Lower expenses to free up cash flow
If you can’t take over a bill or debt, you can do some legwork to help lower your parents’ expenses. Help them shop around for cheaper prices on insurance, cable, or other bills.
And if they have various debts, you can research refinancing or debt consolidation options for them that could help lower their costs. You can also help them downsize their home or refinance their mortgage for lower monthly payments.
Check in on their finances regularly
The sooner you and your parents can get on the same page and plan for the future, the better. It will give you more time to find solutions and grow their nest egg. But executing that plan is a process that will span the last decades of their lives.
You’ll need to check in with your parents regularly about their financial situation and ensure everyone’s doing their part. Once everyone’s on the same page, you can all work together to ensure your parents’ golden years are their best ones yet.
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